Nio has strong growth ambitions both in China and internationally, but the supply chain could stand in its way.
Fiscal 2021 was a rough year for Chinese electric vehicle maker Nio (NIO) – Get NIO Inc. (China) Report.
The pandemic led to supply chain issues that hobbled the entire auto industry, but the environment was particularly toxic for Nio, a company that is just getting off the ground.
Nio was able to deliver 91,429 vehicles in 2021, representing a 109% year over year increase. In the fourth quarter the company delivered 25,034 vehicles, topping analyst estimates of 24,945.
But Nio has a ton of work to do to catch up with Tesla and BYD for the luxury EV lead in China.
Demand for electric vehicles is growing in China with retail penetration growing from 5.9% in January 2021 to 18.6% in December, according to the China Passenger Car Association.
The Tesla Model Y and Model 3 were the third and fourth highest selling electric vehicles in China last year, according to the CPCA. BYD’s Quin was the second highest selling EV.
The top spot went to the Hongguan Mini, which is a more affordable EV, unlike Tesla (TSLA) – Get Tesla Inc Report, BYD and Nio’s luxury models.
None of Nio’s vehicles made the top 15 in 2021, so if Nio wants to make its mark it has some work to do. But the company’s fourth quarter earnings release calls into question its ability to take advantage of a hot EV market in the far East.
Nio’s ET7 Could Face Supply Chain Headwinds
Nio is hoping its ET7 luxury sedan can do for it the same thing Tesla’s Model 3 did for that company.
In China, while SUVs are growing in popularity, the Model Y was the only large vehicle in the top-5 best sellers from 2021. So there is definitely an appetite for electric sedans.
But the question is whether Nio can actually deliver them.
“On the side of supply chain, we are still faced with challenges of growing chip supply, volatility, raw material cost increase, COVID, and the changing international situation,” the company said Friday.
“Although the user demand and order momentum remains strong, the production and delivery have been affected by the COVID and the volatility of supply chain, production capacity.”
The company announced that the first batch of the EV sedans have officially come off its assembly line and deliveries to reservation holders beginning March 28 remain on track.
But still, the company expects first quarter 2022 deliveries to range between 25,000 and 26,000. While this puts it on pace for deliveries ahead of last year’s totals, it may not be enough for investors.
Nio is forecasting first quarter revenue between $1.51 billion and $1.57 billion, which is short of Wall Street’s consensus of $1.66 billion.
Nio’s Has International Growth Plans
If Nio wants to catch Tesla, which delivered nearly 1 million vehicles in 2021 or about 10 times more than Nio, it will have to grow internationally too.
The company recently chose Norway as the first market it wanted to expand to outside of China and the company has posted job openings in Germany and the Netherlands as it searches for fertile EV markets.
Nio said that it will enter Germany, Netherlands, Denmark, and Sweden in 2022, and reach 25 countries by 2025, at its annual Nio Day event.
Nio has also posted nearly 50 job openings on LinkedIn based in the U.S., which could mean it has plans to bring the fight to Tesla’s home turf.
Back in China, to help push adoption, Nio says it has been accelerating the deployment of its power network. As of January 31, the Shanghai-based company has built 836 power swap stations, 3,766 power chargers, and 3,656 destination chargers.
